[Congressional Record Volume 160, Number 96 (Thursday, June 19, 2014)]
[Senate]
[Pages S3856-S3857]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          JOINT STRIKE FIGHTER

  Mr. McCAIN. Madam President, earlier this week I came to the floor to 
discuss ethics in defense procurement contracting, specifically 
relating to the Joint Strike Fighter. I ask unanimous consent that an 
article on this

[[Page S3857]]

topic from Inside Defense be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                  [From Inside Defense, May 30, 2014]

Carter: JSF Program Manager Based F-35 Award Fees on Desire To Protect 
                             Lockheed Exec

                           (By Jason Sherman)

       A former Joint Strike Fighter program executive officer was 
     fired in 2010 after explaining that he based the government's 
     decision to award prime contractor Lockheed Martin 85 percent 
     of the potential award fee--when the F-35 program was 
     suffering from major cost growth and schedule delays--on his 
     desire to protect the job of his Lockheed counterpart, 
     according to a former senior Pentagon official.
       Ashton Carter, deputy defense secretary from 2011 to 2013, 
     on May 16 provided a Harvard University audience a behind-
     the-scenes account of his efforts in 2009, during his first 
     year as Pentagon acquisition executive, to understand why 
     projected costs for the F-35 aircraft had doubled and why the 
     program was facing schedule delays.
       At the time, an independent cost estimating team was 
     advising Pentagon leaders that the true cost to develop and 
     procure the planned F-35 fleet would be billions of dollars 
     more than the JSF program office estimated, foreshadowing a 
     $60 billion increase to the F-35's official price tag.
       Carter said he called in the program manager, whom he does 
     not name during his remarks. At that time, Marine Corps Maj. 
     Gen. David Heinz had recently become the F-35 program 
     manager, in April 2009. His predecessor, from 2006 to 2009, 
     was Air Force Maj. Gen. Charles Davis, now a three-star 
     general and the military deputy to the Air Force acquisition 
     executive.
       ``I want to see the bill, everything that goes into the 
     cost of this airplane,'' Carter said, in a video of his 
     remarks posted on YouTube on May 22. ``The program office 
     didn't know, could not tell me where the money was going.''
       At that time, the F-35's development was being executed 
     under a cost-plus contract, a vehicle that allows a 
     contractor to pass costs on to the government in addition to 
     seeking an award fee. ``I asked the program manager: `Let me 
     see your award fee history.' I look at the award fee history 
     over 10 years, it is 85 percent a year,'' Carter said.
       The former deputy defense secretary said he told the 
     program manager the F-35 program was ``a disaster,'' adding, 
     ``You're giving an 85 percent award fee every year, what's 
     going on?''
       ``And,'' Carter continued, ``he looked me in the eye . . . 
     and said: `I like the program manager on the Lockheed Martin 
     side that I work with and he tells me that if he gets less 
     than 85 percent award fee, he's going to get fired.' ''
       ``So, this guy was fired,'' Carter said of Heinz. Then-
     Defense Secretary Robert Gates announced Heinz's dismissal 
     during a Feb. 1, 2010, press conference.
       Carter subsequently ordered a sweeping technical review of 
     the JSF program and transitioned it to a fixed-price contract 
     in an effort to force Lockheed to shoulder a portion of the 
     costs associated with developmental risks.
       ``We began a process that was very difficult: to re-educate 
     the Air Force-Navy team that managed this important aircraft 
     so that they knew what the hell they were paying for,'' 
     Carter said in the Harvard speech. ``They had no idea.''
       In 2013, the Pentagon restructured the award-fee scheme for 
     the Joint Strike Fighter program, setting aside $337 million 
     that Lockheed Martin could earn by achieving specified goals 
     during the balance of the aircraft's development phase.
       Air Force Lt. Gen. Christopher Bogdan, the current F-35 
     program executive officer, told the Senate Armed Services 
     tactical air and land forces subcommittee on April 24, 2013, 
     that a portion of the remaining award fees Lockheed could 
     earn would be tied to the timely delivery of planned aircraft 
     complete with scheduled software and capability improvements. 
     The bulk of the remaining fee is tethered to achieving the 
     current aircraft development plan on time and budget, he 
     said. (Defense Alert, April 24, 2013).--Jason Sherman

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